“It’s a job. It’s not that you sit on the sidelines and watch the event in an out-of-body experience” – July 1, 2020, Blue and White Unicorn was born on the New York Stock Exchange with the name
Lemonade
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And the $ 1.6 billion price tag, and those are the real-time feelings that accompany the proud father (one of them) Shay Weininger (47). “It’s such an intense process that begins a few weeks before, continues in the moment itself and does not stop even when the event is over,” says the founder and president of the digital insurance company in an interview held as part of BizPortal’s People of the Year project. “You don’t sit and pat yourself on the back and say ‘well done for doing this.’ That’s not my style.”
About five years after it was founded in 2015 by Weininger and Daniel Schreiber, the two founders brought Lemonade to Wall Street, and a day after the IPO, the stock jumped 140% to a price of about $ 69, reflecting a value of $ 3.8 billion. More than 170%, and the company is currently trading at about $ 10 billion – more than five times the value of the issue, which stimulates the appetite and the company today announced an additional $ 800 million raising.
Weininger, for his part, tries to take the credit for him and Schreiber a little further: “It’s not something one or two people do. My and Daniel’s relative is as important but not as significant as that of our employees.”
You might say “man” to the legend of these things, but it sounds like Weininger, as he will tell us later in the conversation, really believes in it, and the workers were part of his vision even before Lemonade was born. To understand, one has to run back to 2014: Weininger stops serving as an officer in Faber, another unicorn he founded alongside Micha Kaufman, as part of which they developed a trading platform for freelancers from all over the world. The company is currently traded at about $ 8 billion and Weininger’s holdings in it are estimated at about $ 300 million, after the stock rose by about 700% in 2020.
Anyway, from this train he got off before the IPO with significant insight for him: “At Faber I realized what was right for me in terms of the type of company I wanted to build, the way I wanted to build it and the type of partners I wanted to have,” he says. “It is important for me at this stage of my career to focus my work around values and build a society that is built around a warm and embracing culture, and not aggressive and built on achievements only. I discovered that it is not contradictory, but the opposite. When I met Daniel I realized we both seek the same and look at the world “.
So you managed to build such a company in the form of Lemonade, and you got with it all the way to Wall Street. For you, are you signaling a “success” or will being successful in Belmonide reach a certain market share in the insurance industry?
“I do not look at success financially. Success for me is a combination of many things. A sense of satisfaction from what you do in my eyes is the main thing, like the challenge you face and the next thing you want to build and not yet deliver. If we have reached a significant milestone we are already thinking about it. The next is a result of true love for what we do and the desire to face non-trivial challenges.
“We do not see the offering as a final stop. Unlike a sale of a company, where people have a year or two left to give work until they move on to a holiday life on some island. To make a company public is to decide that you give your pretty distant future to this company, it’s like a wedding “.
So what challenges do you really face?
“There are many challenges in building a global-scale insurance company. What preoccupies me is the desire to constantly innovate and maintain our status as an insurance company that has been defined as the most beloved by consumers in the United States.”
What about the insurance giants, if they decide to harness their resources and customers in favor of innovation the bowl can not be turned upside down for you? Will you have a place in a situation like this?
“Always the big insurance companies can decide to try to change the model from end to end, give up the agents and take a gamble and be digital only. I think the chances of that happening in the coming years are not high. First of all, they have more to lose than gain. Not just give up the distribution system. “Their main benefit is an app. Show me the manager who will have the courage to make such a decision. In addition, Lemonade is a brand that represents something different for its customers. It is bigger than a website or app. We represent a new generation of companies with social awareness and transparency.”
The built-in failure
It closed 2020 for Monide with an announcement that it had reached a number of more than a million active customers. The company sells home insurance for property owners (structure and contents) and tenants (contents) and animal insurance in 33 countries in the United States, as well as in the Netherlands, Germany and France, where it began operating last December.
In the third quarter, premiums from policyholders totaled $ 188 million, 99% higher than $ 94.9 million in the same period in 2019. The average premium from each customer rose 19% to $ 201. The company’s revenue was $ 17.8 million, about 6% lower than $ 19 million in the same period last year. On the bottom line, the company posted a loss of $ 30.9 million (57 cents a share), compared to a loss of $ 31.2 million a year earlier. The company topped analysts’ forecasts of $ 14.7 million in revenue and a higher loss of 65 cents a share.
In the InShortech / Digital Insurance market, there are other players that sell various insurance products, including Hippo (home insurance), Vishur (car and apartment), Next (digital insurance for small businesses), Oscar (health) and more. The goal is to shake up the traditional market through technology, cut the need for agents who cut commissions and manpower, and perform digital underwriting based on different data and algorithms. Lemonade distribution is done in the B2C model – Business to Consumer, ie directly to the customer, through advertisements in various channels, including online advertising of course.
“I realized we were both looking for the same thing and looking at the world the same way.” Right: Shai Weininger and Daniel Schreiber, founders of Lemonade (Photo: Ben Kalmer)
It is no coincidence that Weininger noted customer satisfaction. Like any insurance company, its premium income should on average cover the cost of acquiring customers (marketing expenses and additional), and this of course depends on the life of the customer. That is, at what stage he might get up and leave and whether by then he had covered for the expenses. In this context, the company will need to find out how loyal customers are who are not afraid of click insurance. One of Lemonade’s strategies is that customers who contracted it as tenants will purchase homeowners insurance through it when they become such, so that it will “earn” them without investing in marketing. As of the third quarter, 12% of them did so.
According to Weininger, most of the InShortech companies established in recent years are actually digital insurance agencies, while Lemonade is a real insurance company. “The fact that we are a company that creates all the layers from the construction of the insurance product, pricing and underwriting to the level of the app and customer service allows us to produce a much better experience than any other company.”
The big insurance companies will ask ‘but how do they insure without looking a person in the white of the eye’. What is the method really?
“Our algorithms and artificial intelligence help us identify good customers and dangerous customers. The amount of data we collect while selling a policy is orders of magnitude higher than the information collected by an agent. We have collected billions of signals that allow us to learn and anticipate risk long before it happens. “Signals that come from NASA satellites and are analyzed in real time. This is how we detect fires before they get out of control and respond immediately.”
Some of your premiums paid by the insured go to donations. What’s the idea behind this?
“Ordinary insurance companies receive premiums from customers, pay claims, cover expenses, and what remains goes down the profit line. If a particular insurance company wants to increase profitability, it can become more efficient, or pay less claims. The entire industry is built on a model that has a clear conflict of interest. The more the claims company rejects and the more it disappoints customers, the more it will profit.
“At an early stage we realized that we could not just build a good app. It was clear that as long as we were in a conflict of interest with customers, we would reach the same situation that traditional companies are in. Therefore, we changed the basic model on which insurance companies are based. Unlike industry, our model limits the profit line. “To a fixed percentage of 25% of the premium – no matter how many claims we reject or approve, what is left, instead of becoming a profit, goes to donations that the customer chooses whom to direct.”
But if you are content with a certain profit anyway, giving up the contribution element could lead to a reduction in premiums, no?
“Every insurance company must build a ‘buffer’ for itself so that it does not lose the ability to pay claims. In our good years, this ‘buffer’ goes to donations to non-profit organizations, and in less good years, when there was greater than usual damage, the amount of donations decreased.”
In Israel you are not active yet, and you live here. That means you are still a customer of the old insurance world?
“My personal experience with insurance in Israel has not been good, to say the least. I’m not talking about the agents, but the insurance companies themselves that are not built in a way that allows them to provide service at the level of technology companies. They still send PDF documents to print. “Scan and send back. The things you can do here yourself are almost non-existent. It must be noted that lately it has become apparent that traditional companies are aware of the risk in the status quo and are trying to improve their digital experience.”
When the browser was still in black and white
If so, Weininger currently serves as president of a company that employs about 600 people (200 of them in Israel), whose resume also includes Faber, and these two were preceded by several other companies. The entrepreneurial spirit was in him, he says, from the beginning, the management capabilities, however, less. “In my early days as an entrepreneur I was a bad manager. I found myself managing people already at the age of 27,” he reveals. “I was young and did not understand a thousand of what I know today, but I learned a lot.”
So how did he get into the field in the first place? Weininger says he came from a background in design and visual communication. ‘I had an attraction to technology and the Internet in its early days – ’91-’92, at a fairly early stage in my career I discovered that my path was the entrepreneurial path. The first company I set up dealt with branding and online marketing, something that more or less did not exist then. ”
After exhausting the field of service delivery and wanting to build things on his own, towards the end of the 1990s he set up his first start-up – a company that built a web browser that operates in virtual reality. During the company’s life, Weininger registered a number of patents in the field. A few months after Weininger received the check from investors, the dot-com bubble burst, which decided the fate of the company. From there he moved on to more companies.
In all these years, have you managed to figure out what it takes to be successful? Enough technical skills and identification of a product that will have a demand, or need more than that?
I was reluctant to define the formula for success, but over the years I realized what could improve the chances: it starts with choosing a huge market, continues with locating something broken in the current experience that requires change, the ability to transform with technology and produce a product that is not only 10 times better. “And most importantly, the composition and chemistry between the entrepreneurs, their experience and the ability to attract the most talented people who will join the venture and believe in it wholeheartedly.”